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Here's Why Investing in MGIC Investment (MTG) is Prudent Now
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MGIC Investment Corporation (MTG - Free Report) should continue to benefit from higher premium yield, lower level of new delinquency notices and financial flexibility.
Northbound Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 1.8% and 3.2%, respectively, in the past 30 days, reflecting investor optimism.
Earnings Surprise History
MGIC Investment has a decent surprise history, beating earnings estimates in four of the last six reported quarters and meeting the same twice.
Return on Equity
MTG’s return on equity for the trailing 12 months is 14.6%, better than the industry average of 9.2%. It expanded 460 basis points (bps) year over year. This reflects efficiency in utilizing shareholders’ funds.
Zacks Rank & Price Performance
MGIC Investment currently carries a Zacks Rank #2 (Buy). In the past year, the stock has lost 6.1% compared with the industry’s decline of 12.3%.
Image Source: Zacks Investment Research
Business Tailwinds
New business writings combined with a higher annual persistency are likely to boost insurance in force.
Higher insurance in force, lower ceded premiums written, net of profit commission, and higher premium yield are expected to benefit the net premium written of MGIC Investment.
The operating results of MTG should reflect the impacts of gains from the solid credit quality of higher insurance in force, strong housing market and decreasing delinquency rate.
New insurance written should gain from the increase in the mortgage origination market.
Considering the higher consolidated investment portfolio and investment yields, net investment income is likely to improve.
The loss ratio is likely to improve, riding on fewer delinquency notices, reflecting the high quality of insurance in force and favorable loss reserve development that indicate better-than-expected cure rates.
Given a lower level of new delinquency notices, the credit performance of insurance in force is likely to improve. MTG continues to gain from the current business environment, the quality of new business rights and the low level of new delinquency notices.
The insurer’s balanced approach to maintaining a strong capital position provides flexibility to maximize the long-term value of both the writing company and the holding company.
MTG expects to approach a longer-term debt-to-capital ratio in the low to mid-teens. MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Mar 31, 2022 MGIC Investment had $372 million remaining under a share repurchase program approved by its board in 2021. In April 2022, MTG repurchased additional shares for $39.7 million under the remaining authorization that expires at year-end 2023.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , Zurich Insurance Group Ltd. (ZURVY - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), Zurich Insurance and Axis Capital carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 33.8%.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings has moved 3% and 5.1% north, respectively, in the past 60 days. In the past year, ZURVY stock has rallied 6.7%.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings implies 7.5% and 9.6 year-over-year growth, respectively.
Axis Capital’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 54.8%. In the past year, AXS stock has gained 14%.
The Zacks Consensus Estimate for Axis Capital’s 2022 and 2023 earnings per share indicates a year-over-year increase of 23.6% and 7%, respectively.
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Here's Why Investing in MGIC Investment (MTG) is Prudent Now
MGIC Investment Corporation (MTG - Free Report) should continue to benefit from higher premium yield, lower level of new delinquency notices and financial flexibility.
Northbound Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 1.8% and 3.2%, respectively, in the past 30 days, reflecting investor optimism.
Earnings Surprise History
MGIC Investment has a decent surprise history, beating earnings estimates in four of the last six reported quarters and meeting the same twice.
Return on Equity
MTG’s return on equity for the trailing 12 months is 14.6%, better than the industry average of 9.2%. It expanded 460 basis points (bps) year over year. This reflects efficiency in utilizing shareholders’ funds.
Zacks Rank & Price Performance
MGIC Investment currently carries a Zacks Rank #2 (Buy). In the past year, the stock has lost 6.1% compared with the industry’s decline of 12.3%.
Image Source: Zacks Investment Research
Business Tailwinds
New business writings combined with a higher annual persistency are likely to boost insurance in force.
Higher insurance in force, lower ceded premiums written, net of profit commission, and higher premium yield are expected to benefit the net premium written of MGIC Investment.
The operating results of MTG should reflect the impacts of gains from the solid credit quality of higher insurance in force, strong housing market and decreasing delinquency rate.
New insurance written should gain from the increase in the mortgage origination market.
Considering the higher consolidated investment portfolio and investment yields, net investment income is likely to improve.
The loss ratio is likely to improve, riding on fewer delinquency notices, reflecting the high quality of insurance in force and favorable loss reserve development that indicate better-than-expected cure rates.
Given a lower level of new delinquency notices, the credit performance of insurance in force is likely to improve. MTG continues to gain from the current business environment, the quality of new business rights and the low level of new delinquency notices.
The insurer’s balanced approach to maintaining a strong capital position provides flexibility to maximize the long-term value of both the writing company and the holding company.
MTG expects to approach a longer-term debt-to-capital ratio in the low to mid-teens. MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Mar 31, 2022 MGIC Investment had $372 million remaining under a share repurchase program approved by its board in 2021. In April 2022, MTG repurchased additional shares for $39.7 million under the remaining authorization that expires at year-end 2023.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , Zurich Insurance Group Ltd. (ZURVY - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), Zurich Insurance and Axis Capital carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 33.8%.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings has moved 3% and 5.1% north, respectively, in the past 60 days. In the past year, ZURVY stock has rallied 6.7%.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings implies 7.5% and 9.6 year-over-year growth, respectively.
Axis Capital’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 54.8%. In the past year, AXS stock has gained 14%.
The Zacks Consensus Estimate for Axis Capital’s 2022 and 2023 earnings per share indicates a year-over-year increase of 23.6% and 7%, respectively.